Ecommerce, Global Protectionism Figured Prominently At G20 Trade Ministers' Meet

 

There were many takeaways from the 2019 G20 Summit in Osaka, Japan. The one that has caught the most attention is the postponement of any new escalations in global protectionism.

 

This G20 summit had a special focus on ecommerce and a new wave of global protectionism sweeping the globe. The results should be regarded as somewhat of a success given the divisions over trade that grew in the early parts of the year.

 

 

 

“G20” is a moniker for “Group Of 20.” These are 20 of the largest economies in the world. 

 

The composition of the group includes both developed and developing countries, including: 

 Taken together, the G20 member countries represent nearly two thirds of the world’s population and around 90% of global GDP.

 

 

 

The G20 commands a lot of heft on matters relating to international trade. Since G20 countries are responsible for the overwhelming share of world trade, this makes their policy decisions matter for a variety of businesses. 

 

 

 

One of the key topics on the table in Osaka was the increase in trade protectionism. In its official leaders’ declaration, the G20 announced that “trade and geopolitical tensions have intensified.” 

 

This refers to events in the early part of the year that saw a swapping of tariffs between major economies. In Osaka, the leaders made public their resolution to address these issues, without announcing major breakthroughs. 

 

 

 

The G20 took place under the shroud of a trade dispute between its two biggest economies, the US and China. In the run up to the G20, there had been disputes involving everything from Chinese companies’ access to US technology to the ability of US farmers to export to China.

 

At the conclusion of the G20, as reported by Aljazeera, US President Donald Trump announced that there would be no new tariffs for now. 

 

The US leader noted that there were around $350 billion worth of Chinese goods that could be subject to new tariffs. In the meantime, dialogue would resume with the Chinese to try and resolve the trade dispute between the two countries.

 

 

 

Trade disputes are not the only risk factor facing the global economy, as laid out by the leaders at the G20. Rather, increased protectionism adds to the slowing down of the global economy which had already been observed due to a variety of factors. Among the challenges weighing down the global economy were high debt-to-GDP ratios and demographic changes.

 

 

 

Ecommerce and its ability to span borders has also contributed to its share of disputes at the G20. 

 

In particular, access and control over digital data has become a bone of contention. India and other developing countries pressed for limitations on the transfer of consumer data.

 

 

 

One of the themes behind the dispute over data and ecommerce is the free flow of data as well as who has control over it. According to The Japan Times, the push for a comprehensive agreement on free data flows in digital commerce were part of Prime Minister Shinzo Abe’s agenda. 

 

The ambitious proposal, supported by the US, Australia, and other developed nations, would see an agreement to lift limitations on data handling. This means that countries would not place limitations on storing user data in foreign-based servers. Rather, this data could be used and accessed by entities across borders in an agreed upon system of rules.

 

 

 

India and Indonesia, among other developing nations, raised concerns over the storage of user data in foreign countries. According to LiveMint’s coverage of the meetings, the countries cited the need to address wider issues such as a perceived data divide first. 

 

Only after a level playing field could be achieved between the different countries’ digital capabilities could an agreement be discussed.

 

 

 

While the news from the Osaka summit on the important issues of tariffs and ecommerce was not bad, it was not too reassuring either. 

 

In particular, the prospect for tariffs still remains, and the uncertain outlook could affect businesses, including retailers.

 

 

 

As noted by a Forbes report, the meetings in Osaka might have averted an extra round of tariffs, but they left in place new tariffs set up in May 2019. After negotiations on a trade deal broke down in May, Trump announced the increase of tariffs from around 10% to 25%. 

 

While the US and China have resumed negotiations, it’s unclear if a tenable solution is within reach. 

 

 

 

Prolonged trade uncertainty has come with costs for players on both sides of the trade dispute. Those particularly badly affected include American farmers and large Chinese businesses that had close relationships with the US. Both have been easy to target for mutual tariffs and trade restrictions due to their political sensitivity.  

 

The mounting financial losses, however, could cause both sides to dig in during negotiations to get some kind of victory that justifies the incurred costs. In effect, while an agreement between the sides would have benefits for both, it remains elusive to get there.

 

 

 

Besides the hot button issues of trade and ecommerce, G20 leaders largely agreed on an assortment of common issues. These include common approaches to addressing the slowdown in the global economy and long term challenges such as changing demographics.

 

 

 

Noting that global growth had slowed down in recent years and that risks remained, the G20 leaders affirmed the need for growth-friendly fiscal policies. 

 

This would help to ease the crunch from stalled growth and prevent the global economy from experiencing a repeat of the 2008 financial crisis.

 

 

In addition, G20 leaders committed to accomodative monetary policy as necessary to grow their economies. 

 

They noted the need for continued coordination between their central banks and common positions on exchange rates agreed at an earlier time in March 2018. With these measures, the G20 hopes to stave off the risk of a full blown global economic slowdown. 

 

 

 

The G20 meeting in Osaka was a bit of a mixed bag for a variety of watchers. From ecommerce operators to international retailers, there was a lot of interest to commercial players. 

 

While it did not shy away from dealing with the hot button issues, any kind of breakthrough agreement was not forthcoming. This is, perhaps, to be expected from the complex nature of the issues and disputes that were tabled. 

 

For now though, there will be no immediate escalation of tariffs.